Burgess met with Tasmanian MP Jacqui Lambie last week and shared that she is also concerned with the current legislation’s proposal to tax unrealised gains.
“Based on discussions with members of the senate crossbench, and Jacqui Lambie, there is a lot of concern over the taxing of unrealised gains and the hope for amendments that will fix that element of the bill,” Burgess told SMSF Adviser.
“We have stressed in our meetings that the only way to fix this was to get the calculation back to actual income or earnings and we provided an amendment which will use actual taxable earnings to calculate the tax to members in funds that can identify and report that information and for others a close proxy for taxable earnings could be used. We think this would be the fairest and simplest way.”
He said SMSFA modelling shows that if the 90-day bank bill rate were used to calculate earnings, over the medium to long term, not only would taxpayers pay substantially less tax, but their tax liability from one year to the next would be far less erratic than the government’s proposed approach.
“Paying less tax was an outcome even if you choose 15 years over the past 30 years when there were successive years of negative returns – which under the Government’s proposed approach could be carried forward and used to offset the tax in a future year,” he said.
Burgess said he understands that independent member for North Sydney Kylea Tink will put forward an amendment to index the cap. Moreover, he said there are also rumours some independent MPs would like to see a clawback position included in the bill.
“That would require some substantial amendments and it is only rumours at the moment, but it has been feted by some independents,” he said.
He added he was not surprised that the bill was postponed last week, but it now means that it will not become law until at least October.
“Depending on priorities, the debate over bills can be subject to change and we expect that given this bill has been deferred a couple of times now, it should be before the House of Representatives this Thursday.”
While the potential impact of the proposed tax on those with illiquid assets such as farms will clearly create unfair pressure on some taxpayers the notion of paying tax on (the recovery of) a loss is bizarre to say the least and is itself on a different level. It is not clear that this concern can get a fair hearing in the lower house given the government has an agenda and the numbers, nevertheless I am hoping that the Senate can do something sensible to prevent taxation of unrealized gains and even losses in some circumstances.